Digg, a once iconic company, a shining star representing ‘the wisdom of the crowds’ was acquired last week for the paltry sum of $500,000. As a social news website founded less than a year after Facebook, Digg rapidly gained users in its early years by allowing them to vote content up or down, but in more recent years the company had struggled.

Digg’s rise and fall account for highly educational reading. The company wasn’t the only site implementing the knowledge of the crowds to determine its content – sites such as Wikipedia crowd-source content as well, and sites such as Google crowd-source page-ranks. All these sites represent a common type of feedback loop seen across various businesses and sectors: that of a need being addressed by an innovative solution, which in turn generates value that increases as the solution scales (in Digg’s case, exploding viewership for those pieces of content that the crowd deemed to be worth the front page), resulting in the emergence of entities that try to exploit the system for unfair benefits. As is well documented, Digg suffered massively from such exploitation that eventually drove away its user base. Compared to Digg, Wikipedia has been affected to a lesser extent by the negative impact of such a feedback loop, since it has been less lucrative from a content positioning standpoint. And Google has dealt with this by over time honing its ability to ban webpages that cross the SEO line. Would it then be fair to say that Digg was just a victim of its own meteoric rise? Maybe slower growth (say the five or so years that Google had before it became a lucrative platform for users) would have allowed Digg to fine tune its ranking algorithms and help stay valuable to its user base? Guess we will never know…